Can an Employer Deny Me a Job Because of My Bad Credit?

Few things are more stressful than doing a credit check only to discover that your credit score is far lower than you’d like it to be. Good credit is often key to securing loans, housing, and even a job. Though it’s not always obvious why a potential employer would want to run a credit check as part of the hiring process, many employers do examine the credit histories of prospective employees when making hiring decisions.

Since bad credit can keep you from landing the job you want, it’s important to understand how your credit history can impact your job search. If you know what to expect, you can create the strongest possible plan for landing your dream job despite having less than ideal results tied to an employer credit check.

Why Do Employers Check Credit Reports?

Some prospective employers conduct criminal and financial background checks on the most promising candidates for a position. They may be required to take this step for legal or licensing reasons.

For example, some jobs require workers to access sensitive information or have a security clearance. These employers need to know that their new hires don’t have a history of criminal behavior related to their job responsibilities.

Similarly, some employers use employee credit checks to better evaluate the risks of hiring specific job seekers. For example, if you have significant debt and you’re asking for a job managing client finances, the employer may ask you why you’re qualified to give financial advice when you’re struggling with your own financial situation.

Can You Be Turned Down for a Job Because of Bad Credit?

Yes, in many states, employers are legally allowed to deny a job applicant based on the results of a credit check, but this usually depends on the nature of the job and the employer’s hiring policies. 

Credit checks are more common in roles involving sensitive information, financial management, or access to large sums of money. Employers in these industries may view poor credit as a potential risk, such as a higher likelihood of financial stress leading to theft or fraud.

However, not all employers conduct credit checks, and laws in some states and cities limit how credit reports can be used in hiring decisions. If you’re applying for a job in an area with these protections — or for a role unlikely to require a credit check — bad credit may not be a barrier. 

Even if an employer does check your credit, bad credit likely won’t automatically disqualify you from candidacy. Employers often focus on specific red flags, such as recent collections or unresolved debts, rather than your overall score. By preparing an explanation and showing proactive steps to improve your financial situation, you can address any concerns and demonstrate your reliability as a candidate.

How Bad Credit Can Impact Your Job Search

When it comes to job applications, the impact of your credit history largely depends on the type of employer and the job you’re applying for. Federal jobs and private-sector jobs have different rules when it comes to using credit checks in hiring decisions.

In general, federal employers are more limited in how they can use credit history during the hiring process. On the other hand, private employers often have more flexibility, although some states and cities have enacted laws to protect job seekers. Let’s explore how bad credit can affect your job search in these two scenarios.

Federal Jobs

Rules for federal jobs are fairly straightforward. The federal government isn't generally permitted to deny employment based on the results of a credit check under federal law. 

That said, if the job you’re applying for requires a security clearance, you may not be eligible for that position if your credit history prevents you from securing it. Make sure that you fully understand the requirements of any job with the federal government before you invest the time and energy applying if you might not be eligible.

Private Employers

The laws around hiring practices for private employers are more nuanced. Each state has its own laws addressing the use of credit information for employment purposes. 

Some states and major cities (see below) have enacted legislation that protects applicants from having their credit histories used against them in hiring and other employment practices. But most states allow private employers to use poor credit history as a lawful reason to reject a job seeker’s application.

If an employer conducts a credit check as part of the hiring process, they're required by law to tell you that they plan to review your credit. Before the employer can pull your credit history, you must provide consent. 

Note that credit scores aren't usually included in employment background checks, but a detailed credit history from the past several years may be included.

Not all employers go through this time-intensive process, but some will if they’re looking for specific red flags. These employers may have concerns about the risk of potential fraud, the need for a security clearance or licensing eligibility, or evidence that the applicant may be vulnerable to bribery.

State and Local Laws That Protect Job Applicants

Although the federal Fair Credit Reporting Act doesn’t prohibit the use of employer credit checks during the hiring process, more than 10 states and several cities have passed regulations that restrict an employer's ability to utilize credit information when making employment decisions. 

This includes the following states:

• California

• Colorado

• Connecticut

• Delaware

• Hawaii

• Illinois

• Maryland

• Nevada

• Oregon

• Philadelphia

• Vermont

• Washington

And it also includes the District of Columbia, Chicago, and New York City.

Will Bankruptcy Prevent Me From Getting a Job?

When you file for Chapter 7 or Chapter 13 bankruptcy, it's recorded on your credit report. It will also temporarily impact your credit score. But just because you filed for bankruptcy doesn't mean you won't be able to get a job.

Sometimes, filing for bankruptcy reflects positively on you as an applicant. For example, if you're applying for a job that requires a security clearance, a bankruptcy filing illustrates that you've proactively dealt with your debt and may therefore be more difficult to bribe. In other scenarios, employers will generally treat a bankruptcy filing like they treat any other negative credit information.

Employers generally treat bankruptcy filings the same way they handle other negative marks on a credit report, like a low credit score or unpaid credit card debt. Anti-discrimination laws protect you from being unfairly treated, but employers can still consider your credit history when making hiring decisions if it’s relevant to the job.

What Should You Do if You Have Bad Credit and You’re Looking for a Job?

Searching for a job with bad credit can feel stressful, but there are steps you can take to improve your chances. These include:

1. Checking your credit report

2. Preparing an explanation for potential employers who may be concerned about your credit history

3. Focusing on jobs that won’t run an employment credit check

4. Improving your credit

Let’s look closer at each step.

Step 1: Check Your Credit Reports

Before you can improve your credit, you’ll need to know where you currently stand. The easiest way to do that is by running your credit report and checking your credit score. You can run free credit reports from each of the three major credit bureaus — Equifax, Experian, and TransUnion — once a week from annualcreditreport.com, which is authorized by the federal government.

Carefully review all your personal information and account information on each credit report. If you see any errors or incorrect information, make note of it. You can dispute those errors, which can help boost your score. 

Step 2: Prepare an Explanation for Employers

If a potential employer asks about your credit history, having a short, honest explanation ready can help ease their concerns. 

Start by briefly acknowledging the issue without oversharing personal details. For example, you could say something like, “I went through some financial challenges in the past due to [a medical emergency, job loss, etc.], but I’ve worked hard to turn things around.”

Next, emphasize the positive steps you’ve taken to improve your financial situation. Mention actions like consistently paying bills on time, reducing debt, or monitoring your credit to stay on top of it. This shows the employer that you’re proactive and responsible.

Finally, reassure them that your financial history won’t affect your ability to perform the job. You might add, “This experience has taught me valuable lessons about financial discipline, and I’m confident it won’t interfere with my ability to excel in this role.”

Keep your explanation short and professional, and focus on how you’ve taken steps to move forward. Most employers appreciate honesty and accountability, especially when paired with a clear effort to improve.

Step 3: Focus on Jobs That Don’t Require Credit Checks

If you’re concerned about how your credit history might affect your job search, consider focusing on industries and roles where credit checks are less common. Many jobs don’t require a credit check, so having bad credit won’t automatically disqualify you.

Credit checks are typically more common for positions in finance, banking, and upper management roles where employees handle sensitive information or large sums of money. On the other hand, industries like retail, hospitality, food service, creative fields, healthcare, and trades (such as plumbing or construction) rarely require credit checks. Small businesses are also less likely to conduct credit screenings during hiring.

Additionally, if you’re applying for remote jobs, keep in mind that your prospective employer’s location may determine whether they can legally use credit information in hiring decisions. Some states and cities, like the ones mentioned above, have passed laws that limit how employers can use credit checks during hiring. If you live in one of these areas or are applying for a remote job based there, these protections might apply to you.

Step 4: Improve Your Credit Over Time

Improving your credit takes time, but small, consistent steps can make a big difference. Focus on paying all your bills on time, as payment history has the biggest impact on your credit score. 

If you have credit card debt, work on reducing your balances to lower your credit utilization — ideally keeping it below 30% of your credit limit. Making timely payments in an effort to reduce your debt and improve your credit utilization can go a long way in repairing your credit. Also, avoid applying for new credit unless absolutely necessary, as this can temporarily lower your score.

Consistency is key. Over time, paying on time, reducing debt, and avoiding new inquiries will gradually improve your credit. Pair these efforts with regular credit monitoring to track your progress and make sure no new errors or inaccuracies are reported. While it can feel slow, sticking with these steps will help you rebuild your credit and improve your financial stability.

Let's Summarize...

Before starting your job search, it’s a good idea to review your credit reports from all three major credit bureaus. Being proactive can help you spot and fix any errors that might otherwise hurt your job prospects. If your credit history is accurate but you’re still concerned about how it might affect your application, research whether your state or city has laws that protect job seekers from hiring discrimination based on credit history. Knowing your rights can provide peace of mind and help you focus on the opportunities ahead.

Even if you don’t live in an area with such protections, remember that most employers use credit checks selectively. They’re often looking for specific red flags tied to the role you’re applying for, rather than rejecting candidates solely for having a poor credit score. By addressing concerns proactively and focusing on your qualifications, you can still position yourself as a strong candidate — even if your credit history isn’t perfect.